UK Supreme Court to decide on multi‑billion‑pound car loan scandal
Supreme Court Hearing May Unlock Billions for UK Car Loan Borrowers
Britain’s top court will decide this Friday whether a decade‑long loan scheme was unlawful, a move that could open a door for millions of motorists to claim billions of pounds from banks.
Background of the Controversial Loans
- Loans launched in 2007 lasted 14 years.
- Car dealers were encouraged to offer higher interest rates, earning larger commissions from banks.
- The scheme was criticised for failing to fully inform buyers.
Supreme Court’s Possible Impact
If the court sides with borrowers, analysis estimates that millions of drivers could be eligible for compensation. The three‑day April hearing has already suggested a sizeable financial exposure for lenders.
Case Highlight: Marcus Johnson
Marcus Johnson bought a Suzuki Swift in 2017 for £6,500 (≈$8,560 today). Unaware that the interest paid on the loan would fund a commission of more than £1,600, he later won a Court of Appeal ruling that ordered FirstRand Bank to refund the commission and interest.
Financial Sector’s Preparedness
- Lloyds has earmarked nearly £1.2 billion in anticipation of the ruling.
- HSBC analysts originally estimated a cost of £44 billion, now revised to around £11 billion.
Supreme Court’s Three Cases
The court is reviewing three consumer cases, including an encounter with British bank Close Brothers.
Possible Regulatory Responses
The Financial Conduct Authority (FCA) banned undisclosed commissions in 2021. Should the court back borrowers, the FCA might mandate a collective automatic compensation program.
Government’s Concerns and Potential Legal Changes
The Labour government worries that a tribunal ruling could affect banks’ willingness to extend credit, especially amid economic uncertainty triggered by US tariffs and geopolitical unrest.
Finance minister Rachel Reeves is reportedly considering legal modifications to limit banks’ exposure.
What’s Next?
Stay tuned for the Supreme Court’s decision this Friday. If the court finds the loan scheme unlawful, the UK will likely witness a monumental compensation wave that could alter the finance sector’s landscape for years to come.
